Buying a property in Spain
The buying process.
Once the property has been chosen, an offer has been made and accepted by the seller and the terms of the sale and purchase are agreed:
A reservation deposit is paid to take the property off the market. The reservation is usually 1% of the agreed sale price.
A date is set for the signing of the private purchase contract between the parties at which point it is customary to pay 10% of the agreed sales price.
The formalisation of the deed of sale (public deed) must be signed by both parties before a Spanish notary public. The task of the notary is to certify this deed of sale as a registered public document.- Transfer of a property intended for the main residence, if the value of the property does not exceed 150,000 euros: 6%.
- Transfer of a property whose value does not exceed 150,000 euros when it is intended for the purchaser's main residence and the purchaser is under 35 years of age, a victim of domestic violence, a victim of terrorism or is acquired in a municipality with a depopulation problem: 3.5%.
- Transfer of a property whose value does not exceed 250,000 euros, when the purchaser is legally considered to be a person with a disability of 33% or more, or a member of a large family: 3.5%.
- Acquisition of a home for resale by an individual or legal entity that carries out a business activity to which the rules for adaptation of the General Plan for the Real Estate Sector are applicable: 2%. The new owner will have a period of 5 years to sell the property. If the property is not sold within this period, the owner will have to pay the difference to compensate up to the normal applicable rate.
- In the event that both the seller and the buyer are legal entities or self-employed VAT taxable persons, and the VAT exemption is waived, there is a "VAT reverse charge", and consequently there is 0% VAT and 1.2% Stamp Duty. In short, second and subsequent sales of real estate between companies/entrepreneurs are only subject to the payment of 1.2% Stamp Duty.
- Certain transactions in which SGRs or state or Andalusian public sector companies participate, the purpose of which is the provision of guarantees: 2%.
N.I.E. (Identification Number for Foreigners).
Any buyer who is not of Spanish nationality must obtain a "NIE" from the Local Police. This number is compulsory for any real estate transaction (buying, selling, supplies, insurance, etc.).
Residence Permits.
It is not necessary to have a residence permit to buy a property in Spain, unless you plan to live in Spain for more than 183 calendar days per year. In that case, you will need to apply for tax residency in Spain. Non-EU citizens wishing to reside permanently in Spain must obtain a visa from the Spanish Consulate in their home country. With this visa they will be able to apply for a residence permit.
Golden Visa.
In order to attract investment into Spain, the government took the decision in 2013 to grant a residence permit valid for 2 years (extended to 5 years in 2015 and including permission to work in the country) and a path to long-term citizenship, to all those willing to invest at least 500,000 euros in Spanish property. Alternatives to property investment include depositing €1 million in a Spanish bank account, investing in shares in Spanish companies with the same amount or €2 million in Spanish public debt or creating a project in the country that generates employment.
It can be renewed indefinitely as long as the investment is maintained. For one year, the investor may live in Spain or not, without jeopardising their residence visa. To maintain and renew this visa, the applicant must enter into Spanish territory at least once a year.
Purchase costs / Taxes.
In general, taxes, legal fees and expenses directly related to the purchase of a finished residential property amount to approximately 10% of the sales price.
New properties purchased directly from a developer or builder: No transfer tax is payable, but a VAT of 10% of the sale value, plus a 1.2% stamp duty. However, on commercial premises and some garages, not attached to a dwelling and plots of land purchased directly from a developer or builder, VAT is 21% plus 1.2% stamp duty.
Second hand homes: There is a Transfer Tax which is set at 7% of the reference value* of the property for all property transactions occurring after 28/4/21.
*Reference value for the calculation of the transfer tax: The taxable base is whichever is higher of the following: The declared sale price or the reference value. The reference value is obtained by taking the cadastral value of the property and applying a multiple that depends on each municipality and that the authorities establish on the basis of market values and is updated every year. To consult the reference value of a property, visit the web site of the Cadastre Headquarters and with the cadastral reference of the property you will be able to obtain it.
However, there are some exceptions or reductions in transfer tax for residents, professionals and companies:
Notary and lawyer's fees:
As stipulated by law, 80% of the Notary's fees are payable by the seller, although in practice it is usual for the buyer to be responsible for the whole amount. Fees are applied on the basis of the scale established by law. Notary fees and the registration of title in the Land Registry are stipulated by law on a sliding scale and amount to approximately 1.5% of the purchase price.
It is advisable to engage a local lawyer to advise the buyer on any aspect of the investment. The lawyer's fee is approximately 1% of the purchase price of the property.
Registration.
It is necessary to register the new ownership by registering the deed of sale (escritura pública) at the Land Registry. This registration is the last step in securing legal title to the property.
Ownership.
A property can be owned by a natural person or a legal entity. Legal entities that own the property can be Spanish companies or foreign companies. For more information read our article on buying property through a company.
In any case we recommend to consult a tax advisor.
Annual property taxes and expenses.
Real Estate Tax (I.B.I.).
This is a property tax levied by the Town Hall and is currently a percentage of the cadastral value. It can vary depending on the municipality where the property is located. As a reference, the applicable rates range between 0.3% and 1.3% of the cadastral value of the property.
Before formalising the purchase of the property, you must obtain from the seller a copy of the last I.B.I. receipt paid. Here you can check the value and the exact amount of the tax.
Rubbish Tax.
To be paid to the local authorities in the amount stipulated by them.
Community Charges.
These fees will be paid to the Community of Owners for the services and maintenance of the common areas when the property is in an urbanisation or condominium. At the signing of the deed of sale at the notary's office, these fees must be up to date and the owner must provide a certificate issued by the community of owners, stamped and signed by the administrator. The cost of this certificate will be paid by the owner.
Annual personal tax.
Non-Resident Income Tax.
This is an annual tax and is payable from the year following the purchase. The Spanish State Tax Agency (Hacienda) estimates that all non-resident owners reap economic benefits from their property and therefore assign to each property an annual attributed income of 1.1% or 2% of the cadastral value of their property.
If the cadastral value of the property has been updated within the last 10 years, the attributed income is 1.1% of the cadastral value, used as the basis for calculating the non-resident tax. If the cadastral value was updated more than 10 years ago, the attributed income becomes 2% of the cadastral value.
Owners resident in non-EU countries pay 24% of the taxable base (either 1.1% or 2% of the cadastral value).
Owners resident in another EU Member State, Iceland and Norway pay 19% of the tax base. This is a reduced rate that has been applied since 2016.
If you rent your property to a third party, residents of the EU, Iceland and Norway pay tax quarterly on a net income (deducting certain expenses) and at a tax rate of 19%. All other non-residents are taxed on gross income (no expenses are deductible) and the tax rate is 24%. In that case, and during the rental period, the attributed income tax rate specified above would not be applicable and only the actual income would be taxed.
Resident Income Tax.
The taxes applied are different between residents and non-residents. Your employment income, real estate, tax benefits, etc are taken into account. Due to a number of relevant factors which may vary according to the individual's circumstances, we recommend that you obtain further information from a professional advisor.
Wealth Tax in Andalusia.
As from 21st September 2022, Wealth Tax has been abolished in Andalusia.
Property owned by a non-resident company.
Where a property is owned by a corporate structure located in a jurisdiction outside Spain, an annual tax of 3% of the cadastral value is payable.
Once the property has been chosen, an offer has been made and accepted by the seller and the terms of the sale and purchase are agreed:
- Transfer of a property intended for the main residence, if the value of the property does not exceed 150,000 euros: 6%.
- Transfer of a property whose value does not exceed 150,000 euros when it is intended for the purchaser's main residence and the purchaser is under 35 years of age, a victim of domestic violence, a victim of terrorism or is acquired in a municipality with a depopulation problem: 3.5%.
- Transfer of a property whose value does not exceed 250,000 euros, when the purchaser is legally considered to be a person with a disability of 33% or more, or a member of a large family: 3.5%.
- Acquisition of a home for resale by an individual or legal entity that carries out a business activity to which the rules for adaptation of the General Plan for the Real Estate Sector are applicable: 2%. The new owner will have a period of 5 years to sell the property. If the property is not sold within this period, the owner will have to pay the difference to compensate up to the normal applicable rate.
- In the event that both the seller and the buyer are legal entities or self-employed VAT taxable persons, and the VAT exemption is waived, there is a "VAT reverse charge", and consequently there is 0% VAT and 1.2% Stamp Duty. In short, second and subsequent sales of real estate between companies/entrepreneurs are only subject to the payment of 1.2% Stamp Duty.
- Certain transactions in which SGRs or state or Andalusian public sector companies participate, the purpose of which is the provision of guarantees: 2%.
Any buyer who is not of Spanish nationality must obtain a "NIE" from the Local Police. This number is compulsory for any real estate transaction (buying, selling, supplies, insurance, etc.).
Residence Permits.
It is not necessary to have a residence permit to buy a property in Spain, unless you plan to live in Spain for more than 183 calendar days per year. In that case, you will need to apply for tax residency in Spain. Non-EU citizens wishing to reside permanently in Spain must obtain a visa from the Spanish Consulate in their home country. With this visa they will be able to apply for a residence permit.
Golden Visa.
In order to attract investment into Spain, the government took the decision in 2013 to grant a residence permit valid for 2 years (extended to 5 years in 2015 and including permission to work in the country) and a path to long-term citizenship, to all those willing to invest at least 500,000 euros in Spanish property. Alternatives to property investment include depositing €1 million in a Spanish bank account, investing in shares in Spanish companies with the same amount or €2 million in Spanish public debt or creating a project in the country that generates employment.
It can be renewed indefinitely as long as the investment is maintained. For one year, the investor may live in Spain or not, without jeopardising their residence visa. To maintain and renew this visa, the applicant must enter into Spanish territory at least once a year.
Purchase costs / Taxes.
In general, taxes, legal fees and expenses directly related to the purchase of a finished residential property amount to approximately 10% of the sales price.
New properties purchased directly from a developer or builder: No transfer tax is payable, but a VAT of 10% of the sale value, plus a 1.2% stamp duty. However, on commercial premises and some garages, not attached to a dwelling and plots of land purchased directly from a developer or builder, VAT is 21% plus 1.2% stamp duty.
Second hand homes: There is a Transfer Tax which is set at 7% of the reference value* of the property for all property transactions occurring after 28/4/21.
*Reference value for the calculation of the transfer tax: The taxable base is whichever is higher of the following: The declared sale price or the reference value. The reference value is obtained by taking the cadastral value of the property and applying a multiple that depends on each municipality and that the authorities establish on the basis of market values and is updated every year. To consult the reference value of a property, visit the web site of the Cadastre Headquarters and with the cadastral reference of the property you will be able to obtain it.
However, there are some exceptions or reductions in transfer tax for residents, professionals and companies:
Notary and lawyer's fees:
As stipulated by law, 80% of the Notary's fees are payable by the seller, although in practice it is usual for the buyer to be responsible for the whole amount. Fees are applied on the basis of the scale established by law. Notary fees and the registration of title in the Land Registry are stipulated by law on a sliding scale and amount to approximately 1.5% of the purchase price.
It is advisable to engage a local lawyer to advise the buyer on any aspect of the investment. The lawyer's fee is approximately 1% of the purchase price of the property.
Registration.
It is necessary to register the new ownership by registering the deed of sale (escritura pública) at the Land Registry. This registration is the last step in securing legal title to the property.
Ownership.
A property can be owned by a natural person or a legal entity. Legal entities that own the property can be Spanish companies or foreign companies. For more information read our article on buying property through a company.
In any case we recommend to consult a tax advisor.
Annual property taxes and expenses.
Real Estate Tax (I.B.I.).
This is a property tax levied by the Town Hall and is currently a percentage of the cadastral value. It can vary depending on the municipality where the property is located. As a reference, the applicable rates range between 0.3% and 1.3% of the cadastral value of the property.
Before formalising the purchase of the property, you must obtain from the seller a copy of the last I.B.I. receipt paid. Here you can check the value and the exact amount of the tax.
Rubbish Tax.
To be paid to the local authorities in the amount stipulated by them.
Community Charges.
These fees will be paid to the Community of Owners for the services and maintenance of the common areas when the property is in an urbanisation or condominium. At the signing of the deed of sale at the notary's office, these fees must be up to date and the owner must provide a certificate issued by the community of owners, stamped and signed by the administrator. The cost of this certificate will be paid by the owner.
Annual personal tax.
Non-Resident Income Tax.
This is an annual tax and is payable from the year following the purchase. The Spanish State Tax Agency (Hacienda) estimates that all non-resident owners reap economic benefits from their property and therefore assign to each property an annual attributed income of 1.1% or 2% of the cadastral value of their property.
If the cadastral value of the property has been updated within the last 10 years, the attributed income is 1.1% of the cadastral value, used as the basis for calculating the non-resident tax. If the cadastral value was updated more than 10 years ago, the attributed income becomes 2% of the cadastral value.
Owners resident in non-EU countries pay 24% of the taxable base (either 1.1% or 2% of the cadastral value).
Owners resident in another EU Member State, Iceland and Norway pay 19% of the tax base. This is a reduced rate that has been applied since 2016.
If you rent your property to a third party, residents of the EU, Iceland and Norway pay tax quarterly on a net income (deducting certain expenses) and at a tax rate of 19%. All other non-residents are taxed on gross income (no expenses are deductible) and the tax rate is 24%. In that case, and during the rental period, the attributed income tax rate specified above would not be applicable and only the actual income would be taxed.
Resident Income Tax.
The taxes applied are different between residents and non-residents. Your employment income, real estate, tax benefits, etc are taken into account. Due to a number of relevant factors which may vary according to the individual's circumstances, we recommend that you obtain further information from a professional advisor.
Wealth Tax in Andalusia.
As from 21st September 2022, Wealth Tax has been abolished in Andalusia.
Property owned by a non-resident company.
Where a property is owned by a corporate structure located in a jurisdiction outside Spain, an annual tax of 3% of the cadastral value is payable.